Every year, the federal government makes a few changes to retirement plans and Social Security. If one of those changes affects you, it's important that you know about it and understand how it impacts you. After all, a slight change in your income could totally change your eligibility for things like deductions, matching funds, or even eligibility to contribute at all.
With that in mind, let's take a look at seven changes that have taken place so far in 2015 -- some big, some not so big -- and what you need to know about them.
1. myRA is here
This new retirement savings account is now available, and it can be a great option for people who don't have access to a retirement plan at work. The myRA is basically a Roth IRA, with the same annual contribution limit of $5,500 (or $6,500, for those aged 50 or older) -- but there are a few key differences. To start, it's only available to people who don't have access to an employer-sponsored retirement plan, and it's funded through direct deposit from your paycheck by your employer.
There are some limits to the myRA, and frankly, it doesn't really have the best long-term investment choices-- it invests you solely in Treasury bonds, which are a safe but low-growth asset. That said, if the myRA gets more people saving, then it's a good start. For more information, go here.
2. Contribution limit changes in 401(k)s
If you have a retirement savings plan at work, it's probably a 401(k). This year, the maximum amount you could contribute from your paycheck was increased from $17,500 to $18,000 (or $24,000 for those aged 50 or older). If your employer offers a (less common) SIMPLE 401(k), the contribution limits increased from $12,000 in 2014 to $12,500 in 2015.
3. Increased income limit for Roth IRA contributions
The amount you can contribute to a Roth IRA didn't increase in 2015, but the amount of money you can earn while still making contributions did increase. Here are the 2015 limits:
|If your filing status is...||And your modified AGI is...||Then you can contribute...|
|married filing jointly or qualifying widow(er)||< $183,000||up to the limit|
|> $183,000 but < $193,000||a reduced amount|
|married filing separately and you lived with your spouse at any time during the year||< $10,000||a reduced amount|
|single, head of household, or married filing separately and you did not live with your spouse at any time during the year||< $116,000||up to the limit|
|> $116,000 but < $131,000||a reduced amount|
The table above represents a $2,000 increase in adjusted gross income from 2014 levels.
4. Increased income limits for deducting IRA contributions
If you contribute to a traditional IRA, there are limitations on how much of your contributions you can deduct from your income. The limits are based on your marital status, income, and whether you or your spouse is covered by an employer's retirement plan. Here's the short version: If neither you nor your spouse is covered by a plan at work, then you can deduct 100% of your contributions from your income in 2015.
If your spouse is covered by a work plan, but you're not, then you can deduct at least part of your contributions, so long as your joint income is less than $193,000. For traditional IRA holders who are covered by a plan at work, the income limit has been increased by $1,000 to less than $71,000 for single filers and by $2,000 to less than $118,00 for married filers.
5. Saver's Credit income limits increased
The Saver's Credit is an awesome benefit for individuals or families with low income, providing as much as $1,000 in extra retirement savings paid as a tax credit. Depending on your filing status and adjusted gross income, you can earn between $375 and $1,000 more in 2015 and still qualify for a tax credit worth up to 50% of your 2015 contributions to retirement savings.
Here are the limits for 2015:
|2015 Saver's Credit|
|Credit Rate||Married Filing Jointly||Head of Household||All Other Filers*|
|50% of your contribution||AGI not more than $36,500||AGI not more than $27,375||AGI not more than $18,250|
|20% of your contribution||$36,501-$39,500||$27,376-$29,625||$18,251-$19,750|
|10% of your contribution||$39,501-$61,000||$29,626-$45,750||$19,751-$30,500|
|0% of your contribution||> $61,000||> $45,750||
6. Need to roll over? Only one per year for IRAs
If you have multiple IRAs that you'd like to roll over and consolidate, then it's probably best to start soon. Starting this past January, the IRS limits individuals to only one rollover each year between accounts of the same type. This can get a bit confusing, so the IRS put together a handy chart:
It's important to note that 401(k)s (which fall under "qualified plan" above) and Designated Roth Accounts are not subject to this rule. So if you have multiple 401(k)s -- either traditional or Roth -- at former employers that you're planning to consolidate, this rule change won't affect you.
7. Social Security changes
If you're claiming Social Security benefits before your designated "full retirement age" this year, and you plan to keep working, then every $2 you earn above $15,720 will cost you $1 in Social Security benefits. If you reach your normal retirement age in 2015, then $1 in benefits will be withheld for every $3 you earn above $41,880. These income limits represent slight increases from 2014.
For those of us still working, the maximum amount of income subject to Social Security taxes increased in 2015 to $118,500. If you earned $118,500 or more in 2014 and will earn at least that amount this year, then you'll pay an extra $93 in Social Security taxes 2015 if you work for someone else. Self-employed? Double that amount.